We remain constructive on the outlook for the USD in the near term but we do think that a lot of good news is priced into the USD at this point. Focus on growth momentum and peaking inflationary pressure could represent a building downside risk for the USD if markets start to reprice Fed tightening risks.
Monthly Forecast For May: 4.2% Click here to learn more
Sterling is bouncing back from a close under 1.25 yesterday with price action following the relatively broad dollar-negative mood through another very quiet London morning. After yesterday’s holiday, UK markets are reopening with gilt yields catching up to yesterday moves in the US and with additional gains as we await Thursday’s BoE announcement; the yield on 2-yr gilts is up 7bps today. The RBA’s largerthan-expected hike overnight may have increased speculation that the BoE hikes by 50bps, but we think this is a very low odds scenario—and only one (Saunders) or two
